Both the IRS and Department of Labor (DOL) have issued new compliance guidance for association health plans (AHPs). On June 21, 2018, the DOL published a final rule that expands the ability of employers to join together to form AHPs. According to the DOL, these changes will expand access to affordable, high-quality health insurance coverage for small businesses.
What is an AHP?
An AHP is covered under the Employee Retirement Income Security Act of 1974 (ERISA) and is a type of group health plan that is sponsored by a group or association of employers (instead of a single employer) to provide health coverage to employees of the AHP’s members. Under ERISA, an AHP is both a group health plan and a multiple employer welfare arrangement (MEWA).
What is the new guidance?
The new guidance issued by the IRS and DOL provides that:
- Participating in an AHP does not cause a small employer to become subject to the Affordable Care Act’s (ACA) employer shared responsibility rules.
- An AHP is a group health plan and a MEWA that is subject to ERISA’s requirements.Under the new rule, AHPs may be established as follows:
- All associations (new or existing) may establish a fully insured AHP starting on 1, 2018.
- Associations that sponsored a self-insured AHP on or before June 21, 2018, may expand within the context of the new AHP rule starting on 1, 2019.
- All other associations (new or existing) may establish a self-funded AHP starting on April 1, 2019.
Small employers that are considering joining an AHP should understand their compliance obligations with respect to this type of plan. Although AHPs may avoid some ACA reforms for the small group market, these plans remain subject to many other legal requirements, including any applicable state regulations.
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